2. Most important trend shaping the global environment: dramatic expansion of the global middle class.
Jock Finlayson, Business Council of B.C., bemoaned Canada’s “slow-moving jurisdiction in a fast-moving world.”
The American economy continues to advance. Over the medium term, “B.C. needs to address a number of important structural weaknesses that threaten our prosperity”.

The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people are so full of doubt.
– Burtrand Russell

3. Historical devaluation of the Ruble triggered significant investment in state of the art sawmilling equipment in Russia. Currency-based advantage led to surge in softwood exports to China. Notion that Russia has an aging, limited infrastructure, is wrong. There are no logistical cost issues in Russia.
– Russ Taylor, President, Wood Markets

5. The panel assembled for the International Markets Review was a rare convention disappointment. U.S. homebuilding constraints are well-known. U.S. housing starts forecasts have become tedious. As for China, when Eric Wong, Canada Wood Beijing Office, warned that B.C. is losing softwood market share, no alarm bells sounded at the Vancouver Convention Centre. Growth in demand offshore is “continual” according to Wong, attributed in part to logging bans in China’s “natural forests” (25 million cube/year harvest reduction). Record softwood imports in 2016 in China >32 million cubes. In a post-beetle world, at least one trader was left wondering if B.C. (“the global resource for softwood,” according to architect Michael Green) should just go off the market.

6. India will be the 5th largest consumer market by 2025. 60% of the population in India is <35.
– Peter Bradfield, Forestry Innovation Investment

7. “The concept of innovation is.. what are you going to do with all of this growing information? Big Data connects people, like us, to the brilliance in the room”. Challenges facing the Big Data Revolution: Volume, Velocity, Variety, Veracity.
– Rory Armes, Founder & CEO, Cumul8

9. How can we keep better track of our natural resources using emerging technologies? We need better data and better analysis tools.
In the future, drone technology and remote sensing will identify the log and the mill, and determine the optimal products and customers – before that tree is felled. “We’re working to offer the industry a turn-key drone.”
– Mike Wilcox, Co-founder/COO, Spire Aerobotics

12. “Changing the public perception about what’s possible.. reshaping public perception.. is the challenge. But it’s really happening. These ideas are not abstract. Thirty storeys? When we do that or will we do that remains to be seen, but it’s possible.” – Michael Green

13. “The construction industry is broken.”
– Michael Green

14. “Here in B.C., we may be making the right products but we need to be part of the right system. The idea is universal. We want to be leaders in becoming part of this ‘system’ thinking.” – Michael Green

16. “We didn’t blockade because we wanted to stop the forestry, we wanted to be a part of it.”
– Chief Derek Orr, McLeod Lake Indian Band

17. “The Tsilhqot’in decision was a game changer. When I first meet with a chief, it better not be to ask to build a road. We’re there to undertake their unique vision for their community. What is your vision? Under-promise and over-deliver. If you don’t honour one of those commitments then your relationship goes backwards.”
– Karen Brandt, VP, Corporate Affairs & Sustainability, Interfor

18. “Engage and engage early. Meaningfully engaging with First Nations is how you build relationships. If you’re too busy to sit down with us, then we’re too busy to give you support.”
– Willie Sellars, Councillor, Williams Lake Indian Band

19. “I like to think Prince George is the Bio Energy capital.”
– Lyn Hall, Mayor, City of Prince George, who confirmed the COFI Convention returns to PG next year.

20. “The urban and rural connection, not the urban and rural divide.”
– Greg Moore, Mayor, City of Port Coquitlam21. “Reinvesting in our business to innovate and modernize the technology in our mills isn’t about making more lumber. We’re not going to make more lumber. We’re going to make more value. Industry and government need to get together to get more value out of a scarce fibre resource.”
– Ted Seraphim, President & CEO, West Fraser

22. “How to run at two shifts efficiently instead of three shifts is the challenge. Three shifts are not possible.” – Nick Arkle, Co-CEO, Gorman

23. “(The softwood lumber dispute) could lovingly be called a hardy perennial. But it is a mutating form of bacteria that has all but become antibiotic-resistant.”
– David Emerson, B.C.’s Trade Envoy to the United States

25. “The softwood file is top of mind for the entire government. We have a strong case but that’s cold comfort for the people feeling the pain of the imposition of duties. A good, strong, fair, mutually-beneficial deal is preferable to long litigation. On both sides of the border, trade is central to maintaining standard of living. Trade creates jobs.”
– Kirsten Hillman, Assistant Deputy Minister, Trade Policy & Negotiation, Global Affairs Canada

Of the Top Ten Questions for 2016 posed at Harderblog one year ago, the first five have been satisfactorily answered for us:

1. Will the Trump presidential campaign have staying power beyond March?
See November election results.

2. Will the US make history by electing a woman as president for the first time?
No.

3. Will BC softwood log exports to Mainland China eclipse BC softwood lumber exports?
For the answer to this question, we turned to Russ Taylor, President, WOOD MARKETS. “Interesting question, but lumber export volumes to China have always been much higher than logs. The gap is narrowing, but lumber export volumes are still much higher.” Russ confirms BC softwood exports to China through October as follows: Logs = 3.0 million m3 vs 2.43 million m3 in 2015 (+23%); Lumber = 5.0 million m3 vs 5.49 million m3 in 2015 (-9%). Of course, log exports even south of the border continue to be a contentious issue.

4. Will a new Softwood Lumber Agreement be reached between Canada and the United States before the standstill period ends October 13?No. By early October, we were told talks had entered the days of magical thinking. And while the US Lumber Coalition’s submission of their petition to the US Department of Commerce was predictable, the November 25 timing caught markets by surprise. At least one forest analyst suggested “it put a whole new spin on Black Friday.”

5. Is this the year virtual reality goes mainstream?As the cost of development falls, we’re told virtual reality is in fact beginning to move into the mainstream. However, it’s reported that most console headsets are still “device-exclusive”. And flaws in these controllers actually tempered demand in 2016, leading Tech Digest to ask will virtual reality finally become mainstream in 2017?

When referencing “Economy” in relation to lumber, we’re talking falldown or lower grade. That’s not to say there can’t be value in economy grade. A whole industry of utilizing lower grades finds economic viability around remanufacturing lower grades of wood. At the same time, bottom-line, results-driven users of lumber are recognizing benefits of enhanced value in quality in planning construction inventory needs. It’s understandable that suppliers concerned with building brand recognition around quality, both in terms of service and product, tend not to build that awareness around ‘economy’.

In the airlines industry, ‘economy’ defines a supposed base line of minimum, acceptable service. Or so we thought. But not so much anymore. In an effort to redefine coach by re-grading passengers, it’s reported here a number of airlines are introducing a section with even fewer perks than economy class. The “deprivations” United passengers will be experiencing with implementation of “basic economy” suggest levels of service that will not allow for any overhead bin space – and declaration for boarding last. Presumably everybody still lands at the same time.

This trend is interesting considering the inferior quality of products and service being promoted seems to be ‘flying’ in the face of other aspects of commercial/industrial/consumer trends. In this age of heightened branding awareness, the airline approach seems to be contradictory to what their branding goals purport to represent. In the lumber business, “adding value” has built-in connotation for upgrade of quality in product and service, not a dumbing down of those variables. In fact, in the event of a new hybrid tax and quota softwood lumber agreement, some suggest that ‘economy’ could be the first to go.. on a slow boat to China.

Vancouver Forest is a unique 900-unit residential development – in Beijing! We’re told here the site was designed to replicate a mini west-side Vancouver neighborhood complete with west-side Vancouver-style housing, landscaping, trees – and bidding wars, presumably. A Google search reveals the plan was hatched in 2002. By 2006, construction had stalled however, when the Chinese government determined single detached homes were not in the collective interest of the country’s more than one billion people. By 2009, construction had resumed, and it’s reported that 900 homes of approximately 4300 square feet each have been completed. According to Business Vancouver, “North American single-family home subdivisions started emerging in China early this century following successful projects such as Orange County, which created a faux Los Angeles an hour’s drive from Beijing.”

So I read with interest a report today in The New York Times. According to the report, this trend of tacking on foreign names to developments around China could be coming to an end. We’re told concern over the foreign names was raised when a recent survey revealed that since 1986, “60,000 township names and 400,000 village names have fallen from use as a result of development and urbanization” in China. The minister of civil affairs has said names that “damage sovereignty and national dignity” or “violate the socialist core values and conventional morality” would be targeted. Meanwhile, developers argue the “international flavor helps sell houses”.

There are many ‘beginning-of-the-year’ tunes or phrases aimed at setting before us the opportunities offered up in a clean New Year sheet. “Getting started is half the task.” “Enjoy the journey.” Even so, this January is a riddle. A year ago, January offered up record snow falls that shut down lumber markets. This year the early weather patterns, while confusing as usual, have largely been hospitable for winter construction activity in most regions of the continent.(Addendum – 1/25: Notwithstanding the giant snowstorm over the weekend which blanketed much of the Northeast…the weather through January was generally hospitable for winter construction in most of the continent)

All fine and good until we acknowledge that our lumber markets are now, more than ever, global. A sudden awareness that China’s declared objectives of switching from a manufacturing economy to a consumer/services economy is impacting negatively on BC’s largest producers’ projections for unabated growth of softwood lumber exports to China. Add in the record lows for oil and it all makes for ‘loonie’ tune forecasts in lumber markets, whatever jurisdiction the focus.

My takeaways from industry connections at the lively LMC Expo in Philadelphia last week suggest year end reviews from analysts point to a mixed outlook for 2016.

Analyst Paul Jannke, Principal of Forest Economic Advisors (FEA) presented at Friday’s breakfast session. I arrived early, having heard Jannke speak back in 2012 at the NAWLA Regional Meeting in Vancouver. A bull in a Bruins jersey back then (see post here), his presentation was decidedly more bearish on Friday. The four factors explaining this year’s lumber price collapse were familiar (lower than forecast U.S. housing starts, lower export volumes to China, rising production capacity, foreign exchange rates). Of greater interest were the reasons why FEA projects that “markets will likely remain weak through next year”:

Mills are anticipating higher levels of consumption (“investing in efficiency”)

U.S. dollar to remain strong

Domestic consumption growth will be slow

Exports to China will continue to be weak

Entering a period of seasonal weakness

Expiration of the SLA.

At the same time, Jannke cited a number of reasons suggesting minimal downside risk (“the longer the time horizon the better we feel”):

Near cost of production for Western SPF

Dealer inventories are low

Limits to Russia’s ability to supply China

Consumption will increase

BC will see supply limitations

Mills will be more cautious with their planning.

When gauging homebuilding activity (FEA forecasts 1.26 million U.S. housing starts in 2016), Jannke said that sales data is the key stat to watch going forward (“new home sales are presently consistent with just over one million starts”).

Later that morning, I appreciated the opportunity to speak with Jannke at our Dakeryn table on the exhibit floor. It was interesting to hear him say that lumber market conditions might play a role in the timing of any cross-border trade negotiations (“to help in proving injury”). When I asked how Canadian sawmill expansion in the Southeastern U.S. might play into those negotiations, Jannke downplayed the impact while noting that members of the U.S. Coalition for Fair Lumber Imports include a number of private timber owners. I also asked how so many forest analysts “got it wrong” in their 2015 forecasts for significantly higher lumber prices. Jannke said that while he couldn’t speak for other analysts, FEA had one of the more tempered price forecasts this year ($300-320/M).

The impact of the Chinese market on domestic lumber prices has become increasingly more dramatic in recent times. In November 2013, a month in which the Random Lengths Framing Lumber Composite Price averaged $398, forest industry analyst David Elstone warned “If the Chinese were to stop buying today, the North American market would be in massive disarray.”

Fast forward to today. Demand has stalled in China (B.C. softwood lumber exports to Mainland China were down 18.1% in June and 19.5% in July, YOY). The Composite Price sits at $303. The inconvenient timing of China’s arrested demand, with the Softwood Lumber Agreement about to expire, is a double whammy for B.C. producers.

In today’s Vancouver Sunhere, most probably agree with policy analyst Naomi Christensen’s view that it is in Canada’s interests to pursue a new Softwood Lumber Agreement. The weak loonie, rising production, and flailing offshore demand however would all seem to make the upcoming trade talks/negotiations with the U.S. especially problematic. It makes one wonder how much of the rationale for Canadian sawmill acquisitions south of the border is aimed at helping hedge revenue sources – exempt from the challenges in cross-border tariff discussions – as much as it is about securing timber.

The volume of softwood lumber traded around the world this year is on pace to to be the highest since 2007, according to the Wood Resource Quarterly (WRQ). A regional summary of the full report from WRQ is available at MarketWatchhere. In the ebb and flow, perhaps not surprising that while softwood lumber prices in North America trended downward from a summer peak, the quarterly import volume in China bulged to the second highest on record. It seems now that, while things are specific by region and mill in terms of both supply and/or demand, there is greater interconnectedness among variables that are at play. Increasingly, therefore, the impact of globalization is apparent in establishing market pricing across the board.

When BC’s BigTree Registry came into the possession of the University of British Columbia in 2010, “it was a mess of paper records” reports The Vancouver Sun. Confirms Sally Aitken, professor of forests and conservation sciences at UBC: “It consisted of several bankers’ boxes of paper records, maps of various sorts and qualities, some photos and then there was just a single list of trees. It was not something that people could really access information from easily.” Access for all is now just a click away at the impressively concise UBC Faculty of Forestry BC BigTree Website which includes a link to the Registry.

Perusing the Registry, it seems safe to presume the giant tree we encountered last month on a visit to Vancouver Island is identified as tree #102. The biggest Coastal Douglas Fir in Cathedral Grove, the registry verifies measurements for tree #102 as: height 70.1 metres, circumference 10.11 m, crown spread 20.7 m. With a “score” of 645, the tree is presently ranked number 8 in the province, species Pseudotsuga menziesii. It was particularly interesting to discover that two Douglas Fir trees located here in North Vancouver are even bigger. With scores of 675 and 673, they presently hold the number four and five rankings on the list of champions.

Updated 10-17:An email response to this post from BC BigTree Registry confirms tree #102 is not the giant pictured below. In fact the tree below has yet to be nominated: “The receipt of your photo prompted some interesting discussion and it was discovered that tree #102, last measured in 1990, was greatly reduced in size during the big wind storm in 1997.. it is now only 100 feet tall and no longer the largest tree in the grove.. the Registry will be updated to include this new information for tree #102.”

“This you inherit; guard it well, for it is far more precious than money, and once destroyed, nature’s beauty cannot be repurchased at any price.”
– Quote from Ansel Adams
as posted at UBC Faculty of Forestry BC Big Tree Website